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Note 27.8 Financial Risk Management
(continued)
b) Financial assets:
The Company holds variable
interest rate financial assets
and fixed interest rate financial
assets. However, it does not
designate fixed interest rate
financial assets at fair value
through profit and loss.
Therefore, changes in interest
rates of fixed rate instruments
would not affect profit or loss |
equity.
As at March 31, 2017, the
exposure to interest rate risk
due to variable interest rate
loans amounted to
`
4.30 cr
(March 31, 2016 and April 01,
2015:
`
4.30 cr)
In order to manage its interest rate
risk on variable interest rate financial
assets, any new loan is as per the
Policy of the Company.
The Company has calculated the
impact of a 25 bps change in interest
rates.
A 25 bps increase in interest rates
would have led to approximately
an additional
`
0.01 cr (2015-16:
`
0.01 cr) gain in Other
Comprehensive Income. A 25 bps
decrease in interest rates would have
led to an equal but opposite effect.
ii)
Foreign exchange risk
The Company has international
operations and is exposed to
foreign exchange risk arising from
foreign
currency
transactions.
Foreign exchange risk arises from
future commercial transactions and
recognised Financial assets and
liabilities denominated in a currency
that is not the functional currency
(INR) of the Company. The risk also
includes highly probable foreign
currency cash flows. The objective
of the cash flow hedges is to
minimise the volatility of the
`
cash
flows of highly probable forecast
transactions.
The Company has exposure arising
out of export, import, loans and
other transactions other than
functional risks. The Company
hedges its foreign exchange risk
using foreign exchange forward
contracts and currency options after
considering the natural hedge. The
same is within the guidelines laid
down by Risk Management Policy of
the Company.
As an estimation of the approximate
impact of the foreign exchange
rate risk, with respect to Financial
Statements, the Company has
calculated the following:
For derivative and non-derivative
financial instruments, a 2% increase
in the spot price as on the reporting
date would have led to an increase
in additional
`
3.76 cr gain in Other
Comprehensive Income (2015-16:
gain of
`
2.25 cr). A 2% decrease
would have led to an increase in
additional
`
2.36 cr loss in Other
Comprehensive Income (2015-16:
loss of
`
0.91 cr).
Foreign currency risk exposure:
The exposure to foreign currency risk of the Company at the end of the reporting period expressed in
`
cr, are as follows:
Particulars
As at
March 31, 2017
As at
March 31, 2016
As at
April 01, 2015
USD EUR GBP USD EUR GBP USD EUR GBP
Financial assets
Trade receivables
244.26 16.80
0.77 202.95
8.58
1.52 186.33 15.93
1.03
Dividend receivable
–
– 5.25
–
–
–
–
–
–
Less:
Hedged through derivatives (Includes hedges for
highly probable transactions up to next 12 months)
Foreign exchange forward contracts
–
–
–
–
–
– 4.38
–
–
Currency range options
49.60
–
– 83.25
–
– 162.74
–
–
Currency vanilla options
–
–
– 44.00
–
–
–
–
–
Net exposure to foreign currency risk (assets) 194.66 16.80
6.02 75.70
8.58
1.52 19.21 15.93
1.03
Financial liabilities
Borrowings
69.15
–
– 95.21
–
– 97.93
–
–
Trade payables
52.33
1.52
0.04 35.51
0.78
0.82 38.15
0.40
0.13
Less:
Hedged through derivatives (Includes hedges for
highly probable transactions up to next 12 months)
Foreign exchange forward contracts
58.35
–
– 59.98
–
– 12.52
–
–
Interest rate swaps
–
–
– 2.07
–
– 12.39
–
–
Currency swaps
10.80
–
– 33.17
–
– 52.16
–
–
Net exposure to foreign currency risk (liabilities) 52.33
1.52
0.04 35.50
0.78
0.82 59.01
0.40
0.13
Notes
to the Financial Statements